US appeals court reinstates digital recording suit

NEW YORK, Feb 21 (Reuters) - Rhythm and blues artistswho recorded albums dating back to the 1950s won a court battle onThursday when an appeals court reinstated a copyright suit againstmajor record companies over digitized works sold on the Internet ordownloaded from Web sites.

The Second Circuit Court of Appeals vacated a lower court rulingthat had thrown out the case filed by members of The Chambers Brothers,The Coasters, The Original Drifters and The Main Ingredient.

Defendants in the suit, filed in Manhattan federal court, are AOLTime Warner Inc, Sony Corp of America, a unit of Sony Corp, BMGEntertainment, a unit of Bertelsmann AG, and Universal Music Group andMP3.Com, which are owned by Vivendi Universal.

The appeals court ruled the district judge had improperly consideredcertain materials when he dismissed the suit. It sent the matter backto the district judge for further consideration.

The lower court had dismissed the case after finding the plaintiffs'recording contracts effectively transferred their rights in digitalversions of their recordings to the record companies and thus barredtheir federal copyright infringement claims.

The artists had recorded music for labels owned by the defendantsfrom the 1950s through the mid 1990s. Under the contracts, theplaintiffs assigned ownership rights, including copyrights, to therecord companies in exchange for royalties from the sale of theirrecords.

However, they said that the "digital revolution" changed the waymusic is recorded, distributed and sold.

They argued that when the original analog master recordings, whichserved as the basis for the production of vinyl records and cassettetapes, were remastered digitally and placed on CDs, they becamesusceptible to rapid reproduction by computer as digital audio files.Once the files were placed on the Internet, they could be downloaded toa computer or simply broadcast over the Internet in a process called"streaming."

The recording artists alleged that their contracts did not grant therecord companies the right to sell or authorize others to selldigitized versions of their pre-1996 performances on the Internet or to"digitally download" or "stream" their works.

The plaintiffs argued that unauthorized "clones" of their digitalrecordings are competing with sales of recordings in the vinyl,cassette and CD formats, thereby reducing their royalty stream.